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SME Supply Chain Management What’s important to being & staying competitive? Robert Krieger President What is a Customs Broker? • • • • • Licensed by CBP Part of the Dept. of Homeland Security Corporate License & Permit Individual License Holders What is import when choosing one What is an International Freight Forwarder? • Licensed by FMC • NVOCC tariffs published • Anti-rebate policy • Confusing terminology • Not licensed • Most CNS (IATA) members • TSA regulation US Focus on Security • • • • National Threat Center Increased examinations Voluntary C-TPAT program Stepped up TSA enforcement Krieger Worldwide • Customs Brokerage & Forwarding in USA, Mexico and Hong Kong • Warehouse & Distribution Services • Domestic Transportation • Logistics Consulting Services • Insurance • Duty Drawback programs • Importer Security Filings What do you need to know? Concerns Opportunities Customs Regulations • Regulated by 19CFR – “Informed Compliance & Reasonable Care” – Importers required to submit Entry • Most importers use brokers • Entries filed electronically – Includes data about manufacturer, importer, classification, conveyance, and valuation Importers Responsibility • Verify accuracy of entry – – – – – – Prior to submission Marking of Goods Description Country of Origin Manufacturer Piece Count Entry Review • Government retains right to review entry – Review final upon liquidation • Importer retains right to review entry – Strict time limitations apply Examination • Government retains right to inspect cargo – Based on entry criteria – Based on risk management – Depending on product & statutes up to 6 months after importation • Failure to redeliver results in penalty • Regardless of examination importer responsible to be comply Non-Compliance • If CBP believes importer in violation – Likely investigation – Possible civil penalties – Possible criminal penalties Related Party • Most brokers don’t ask • Most importers answer incorrectly when asked • Significance? Valuation • • • • • • Transaction value is implied (TV) TV of identical merchandise TV of similar merchandise Deductive value Computed value Sec 152.107 value if other values cannot be determined Transaction Value • Additions to arrive at dutiable value – – – – – Royalties Licensing fees Packing costs Selling commissions Apportioned value of any assists • Penalties for omissions & wrong valuation Classification • How to determine correct rate of duty? – – – – – Harmonized Tariff over 215,000 classifications Modified by chapter notes Modified by GRI’s Effected by Binding Rulings Effected by court decisions Examples • Wheel Chairs – – – – Custom’s view Importer’s view Our view Verdict • Radio Watches – – – – Custom’s view Importer’s view Our view Verdict Freight Issues • When can we get the freight? • How much will it cost? What is the real cost? • Individual shipment bids—wasteful • Tendency to focus on lowest bidder • What is the real cost of cheap rates & poor service to your business? Case Study in Freight • Audited 36 random transactions – Poor carrier selection • Vessels too slow (China-DC = 26-31 days) • Unreliable service • Over dependence on airfreight when speed needed – Airfreight issues • Dimension on AWB 12% above packing list • Transit time, factory to door, 12 days! Findings in the Case Study • Problems identified: – Customs broker different from Forwarder • Did not coordinate well together – Customs broker coordinated poorly with trucker – Forwarder used cheapest airline, charged premium rates and overcharged on dimension Additional Findings • • • • • Freight shipped to wrong port Paid freight on CFR shipments Paid insurance twice Did not consolidate freight Paid extremely high export freight rates Visit to Distribution Center • Measured 40 different cartons – Most had incorrect measurements printed on the cartons Case Study Conclusion $2,000,000.00 to $3,000,000.00 Possible savings if international freight properly managed. Export Issues • Duty Drawback – Goods imported then re-exported – Fungible items – Complex—may not be worth the effort • Export Controls – Controversial – Difficult to understand Hot Topics • • • • Import Compliance Free-Trade Agreements Foreign Trade Zones (FTZ) Security Import Compliance • Focused Assessments • Increased Audits • Smuggling & Illegal Transshipments – Importers must take steps to verify origin – Detentions & seizures have increased FTZ – Free Trade Zone • • • • • • Goods outside Customs Territory of US Tariff shifts possible Delays duty payment Export without drawback headaches Fix problematic goods Reduce MPF Conclusion • Importing is extremely complex – Regulated by Customs & other agencies – Easy to make mistakes – Importer needs to be compliant • Importer’s best friend = Broker/Forwarder Thank You